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Quarterly Stakeholder Update

8 May 2018

FY18 Q3For the Quarter ending 30 March 2018

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FY18 Q3 Update

o Executive summary of the full report

o View the full report and other materials here: https://www.icann.org/quarterlyreports

o Q&A webinar on 14 May 2018 which is your opportunity to ask any questions

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Executive Summary

Göran Marby, ICANN President and CEO

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Financials and Long-Term Planning

¤ FY18 Q3 financials:¡ Funding continues to be below budget, consistently with our previous

forecasts. Our careful management of expenses, which are also significantly below budget, allows us to show a small net excess.

¡ We expect these trends to continue through the end of our fiscal year in June.

¤ Draft FY19 Operating Plan and Budget

¤ Over 165 comments received - view org report to comments here: https://www.icann.org/en/system/files/files/report-comments-fy19-budget-24apr18-en.pdf

¤ Updated final proposal to be posted on our website mid-May

¤ Anticipated Board adoption end of May

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General Data Protection Regulation

¤ 3 May - the ICANN Board passed a resolution to begin the pre-consultation with the Governmental Advisory Committee on its San Juan advice regarding the GDPR

¤ 27 April – ICANN met with a group of contracted parties to discuss operational and technical aspects of ICANN’s Proposed Interim Modeland compliance with GDPR

¤ April – Received helpful guidance from the Article 29 Working Party on several elements of our proposed interim model¡ Guidance did not include an extended timeline to implement the

necessary changes to the WHOIS services.

More info: https://www.icann.org/resources/pages/gdpr-legal-analysis-2017-11-17-en

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Policy Update: Supporting Organizations (SOs)

Address SupportingOrganization (ASO)Country Code Names SupportingOrganization (ccNSO)Generic Names SupportingOrganization (GNSO)

Supporting Organizations (SOs)

ccNSOThe ccNSO (Council and members) works on global policies relating to country code top-level domain name (ccTLD) policies (e.g., .br, .uk).

ASOThe ASO Address Council is composed of 15 volunteers — 3 from each of the Regional Internet Registries (RIRs)— who work on global Internet Protocol (IP) Address Policy.

GNSOThe GNSO Council is composed of 21 members — divided into 2 houses (contracted and non-contracted parties) — who work on generic top-level domain name (gTLD) policies (e.g., .com, new gTLDs).

Three SOs in the ICANN community are responsiblefor developing policy recommendations in the areas they represent.

3 resolutions adopted9 policy development processes underway

FY18Q3

FY18Q3

20 resolutions adopted4 policy activities underway

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Key Signing Key (KSK) Rollover Update

¤ Planned date of rollover is 11 October 2018

¤ Draft rollover plan based on community feedback was posted on 1 February 2018¡ Response to public comments were posted end of

April

DATA

KSK

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Information Transparency Initiative (ITI)ITI FY18 Q3 Highlights

¤ Built foundational architecture of the content management system (CMS) and document management system (DMS), and developed the integration between the two platforms.

¤ Completed sixty percent of the audit and taxonomy, including Board, Legal, and GDD content.

¤ Developed foundational workflow model in the DMS.

¤ Launched feedback.icann.org (April 2018)

¤ Updated definitions for 250 Acronyms and Terms. The new feature launches on the current icann.org on 30 May 2018 with more opportunity for more feedback at launch.

¤ On budget for FY18, but there is some risk of needing ITI project contingency in FY19 and 20, as feature and content complexity increases.

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Board Update

Cherine Chalaby, Chair of the Board

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Board Update

¤ General Data Protection Regulation (GDPR) ¡ ICANN org will undoubtedly continue to engage until the last

minute in constructive dialogue with the Article 29 Working Party, the European Commission and our community

¤ FY19 Operating Plan and Budget. Based on public comments, three changes were made¡ Fellowship program¡ CROP request mechanism¡ ICANN Wiki

¤ Uniform Board Member Integrity Screening Process

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January – March 2018FY18 Q3 Report

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Policy Update

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Generic Names Supporting Org. (GNSO)Areas of Work in FY18 Q3

In addition to 9 policy development process in progress:¤ Adopted charter for the ICANN Procedure For Handling WHOIS Conflicts with Privacy Law

Implementation Advisory Group (WHOIS Procedure IAG). The call for volunteers is to be launched on or after 1 June 2018.

¤ Considering the proposed charter for an Internet Governance Engagement Group.¤ Working with ICANN staff on a post-implementation review framework to guide any reviews of

implemented GNSO policy recommendations.

Completed Work in FY18 Q3

¤ The GNSO Council adopted revised GNSO Operating Procedures and proposed a set of modifications to the ICANN Bylaws for ICANN Board consideration to address all the new and/or additional rights and responsibilities in relation to participation of the GNSO as a Decisional Participant in the Empowered Community and the new accountability mechanisms.

¤ Nominated replacement candidate for Second Security, Stability, and Resiliency of the DNS (SSR2) Review Team.

¤ Submitted its input to the proposed FY19 Budget, the proposed Operating Standards for ICANN Specific Reviews as well as the proposed incremental changes to the ICANN Meeting Strategy.

¤ Withdrew as a Chartering Organization of the Internet Governance Cross-Community Working Group.¤ Agreed upon a detailed description of the role of GNSO Council liaisons to PDP Working Groups.

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Country-Code Names Supporting Org. (ccNSO)Areas of work in FY18 Q3

¤ Participated in Country Code Policy Development Process 3 Working group on retirement of ccTLDs

¤ Participated in GNSO Policy Development Process subsequent procedures work track 5 (geographic names)

¤ Started the ccNSO Study Group on Use of Emoji in domain names¤ Reviewed implementation plan of risk mitigation procedure regarding confusing similarity under

Internationalized country code Top-Level Domain Fast Track process

Completed work in Q3

¤ Created of GAC-ccNSO meeting agenda committee, with members from GAC and ccSNO¤ Finished input to GAC Underserved Regions WG FAQ on delegation, transfer and revocation of

ccTLDs¤ Decided not to participate in RDS/WHOIS 2 Specific Review: major reason was the need to

understand the impact of the General Data Protection Regulation on WHOIS/RDS, and the recommendations of the first WHOIS review, first, before starting the review

¤ Reviewed the ccNSO Meeting Strategy¤ Participated and produced statement on FY19 Budget and Operating Plan¤ Held elections for Chair (Katrina Sataki, .LV) and Vice-Chair (Debbie Monhan, .NZ) and Byron

Holland, (.CA)

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Management Update

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Root KSK Roll Update

• Draft rollover plan based on community feedback was posted on 1 February 2018, KSK Rollover planned for 11 October 2018

• Analysis of root trust anchor configuration data from ostensible resolvers continues

• Modern DNS resolvers report trust anchor configuration to root servers• Preliminary analysis of this trust anchor report data was the basis for

postponing the root KSK roll in September 2017• The number of addresses reporting trust anchor configuration is continuing to

increase, as is the percentage of those sources that report not being configured with the new trust anchor

• However, subsequent analysis (not yet published) suggests that most of the addresses reporting trust anchor data are either not resolvers, or resolvers not used by any significant population of end users

• The trust anchor report data is therefore likely not a good indicator of the actual level of readiness of real resolver operators for the root KSK roll

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Office of the CTO Update

¤ Continued progress on Open Data Initiative¡ A Request For Proposals (RFP) to choose an open data Software as a Service

(SaaS) platform was opened on 13 March 2018 and the team is on target to choose a platform by early July 2018

¡ The team continues to hold meetings with internal data owners and stakeholders and is finishing work on an initial version of an ICANN data catalog, known as the ICANN Data Asset Inventory

¤ Identifier Technology Health Initiative (ITHI) project continues ¡ Data collection for six of the seven metrics for measuring the health of naming

identifiers has begun, with details presented at ICANN61¡ Continued to engage recursive resolver and TLD operators to obtain Personally

Identifiable Information (PII)-free data as input to these metrics

¤ ICANN co-hosted IETF 101 in London, UK ¡ In ongoing efforts aimed at supporting the Internet Engineering Task Force (IETF)

and its work, ICANN co-hosted the 101st meeting of the IETF in London in mid-March

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Information Transparency Initiative (ITI)ITI FY18 Q3 Highlights

¤ Built foundational architecture of the content management system (CMS), dotCMS, and document management system (DMS), Alfresco.

¤ Completed sixty percent of the audit and taxonomy, including Board, Legal, and GDD content.

¤ Developed foundational model of workflows in the DMS, assessment of translation model.

¤ Launched feedback.icann.org (April 2018)

¤ Updated definitions for 250 Acronyms and Terms. The new Acronyms and Terms feature launches on the current icann.org on 30 May 2018.

¤ ITI is on budget for FY18. Current estimates for FY19 and FY20 project that ITI will remain on budget.

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GDD Highlights¤ IANA functions audits Service Organizational Control (SOC) 2 and SOC3

completed (29 March)

¤ The third version of the Maximal Starting Repertoire (MSR-3) was released (29 March)

¤ Name Service portal (NSp) Registrar version 1.0 successfully launched (26 March)

¤ Domain Name Registrant Blog Educational Series entitled ‘Do You Have a Domain Name? Here’s What You Need to Know’ continued; One additional blog published (26 March)

¤ Call for experts to study the application of Root Zone Label Generation Rules (RZ-LGR) issued (18 February)

¤ IANA Services Customer Service Satisfaction survey published (18 January)

¤ Guidelines for the implementation of the Consensus Policy for Protection of Certain Specific IGO and INGO Identifiers for all gTLDs issued (16 January)

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GDD: New gTLD Program

The New gTLD Program is driving the largest expansion of the Domain Name System ever. Hundreds of new top-level domain names are being introduced into the Internet on a rolling basis.

The New gTLD Program is meant to enhance competition, innovation and choice.

WHY IT’S IMPORTANT

* As of 31 March 2018. May fall into more than one subcategory

1,230 gTLDs delegated representing*:

Total registry agreements signed1,245

Geographic: 53

Community: 52

IDNs: 95

As of 31 March 2018

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GDD: Internationalized Domain Names

IDNs at the top-level enable Internet users to access domain names in local languages and scripts.

IDN ccTLDs allow countries and territories to represent their respective names in scripts other than Latin characters.

WHY IT’S IMPORTANT

MORE INFORMATION: https://www.icann.org/IDN

As of 31 March 2018

6

151

13

IDNs delegated into the root zone -Includes 56 IDN ccTLDs from 38 countries and territories covering 33 languages in 19 scripts

6Root Zone Label Generation Rules (RZ-LGR-2) released as of August 2017Integrated Arabic, Ethiopic, Georgian, Khmer, Lao, and Thai

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GDD: Global Support & Operations

Cases Processed

4,500General Inquiries

4,144

Registrant Phone Calls

Contracted PartyService Requests

1,179

863

100%

4.2 / 5.0Customer

Satisfaction

Service Level TargetAchievement

1 January - 31 March 2018

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GDD: Public Comment Activities

¤ Proposal for Korean Root Zone Label Generation Rules (opened 25 January; closed 17 March)

¤ Maximal Starting Repertoire version 3 (MSR-3) for Root Zone Label Generation Rules (RZ-LGR) (opened 17 January; closed 26 February)

1 January - 31 March 2018

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PTI: IANA Functions

993Domainrelated requests

Protocol related requests1052 1

Number related events

1General inquiries337

Key signing ceremony

Name, Number and Protocol Parameters

1January- 31March2018

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Contractual Compliance

Audit Update

Compliance Operational Metrics

(New) Quarterly Closed Complaints by Closure Code are now published here.

Additional Information on Complaints Related to GAC Category 1 Safeguards is published here.

Enhanced Compliance Reporting

New Registry Audit round started in March 2018- 20 new gTLDs are in scope

Registrar audit is in completion phase- 58 Registrars are in scope

Total New Volume (In Thousand)

Total Closed Volume

(In Thousand)

Closure Rate (Target >=5.5)

(55%)

Received to Closed TAT (Business

Days)Q2 FY18 14.497 11.486 5.50 15.6Q3 FY18 9.372 11.014 6.95 15.9

TAT= turn around time

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ICANN Reviews Status

SPECIFIC REVIEWS ORGANIZATIONAL REVIEWS

Find more information here: https://www.icann.org/resources/reviews

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Fellowship and NextGen Programs

Fellowship Program• There were 53 Fellows selected for ICANN61 from 44 countries

• 33 were new to the Fellowship program • 20 were alumni

NextGen Program• There were 15 participants for the NextGen program, from 5

different countries

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Government and IGO Engagement HighlightsHeld two capacity building workshops with the Government Advisory Committee (GAC)

– Kathmandu, Nepal - for South Asia regional GAC members and other stakeholders in February in conjunction with the APRICOT and APNIC meetings.

– San Juan, Puerto Rico – for Latin America and Caribbean stakeholders, on resilience and disaster recovery of the DNS, focused on Caribbean and Latin America

• Planning is underway for two additional events: for the Francophone African community in Dakar Senegal in May 2018, in conjunction with the Africa Summit; and the AFNIC meetings and for Latin America at ICANN 62 in Panama in June 2018.

• An evaluation of the capacity building programs will be completed at the end of FY18 and a preliminary report presented to the GAC for initial discussion at ICANN62.

Government and IGO Engagement (small sample)• ITU WSIS Forum - Geneva, Switzerland - presentations and panel participation• Participation in UNCTAD E-Commerce week – Geneva Switzerland • Attending regional preparatory meetings for ITU PP-18• Bilateral visits and meetings with many government officials including representatives from

the UK, UAE, Egypt, Spain, Sweden, ITU Sec General and CTO Sec General in coordination with regional GSE teams

Participation in Internet Governance Discussions• Internet and Jurisdiction conference – Ottawa, Canada; Mobile World Congress – GSMA in

Barcelona, Spain; Big Data and Diplomacy event – DIPLO – Geneva, Switzerland

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Financial Update FY18 Q3For July 2017 – March 2018

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ICANN Organization Reporting Structure

ICANN Operations New gTLDProgram

Funding

Expenses 2

Funding

Expenses2

Operating Fund

IANA STEWARDSHIP

TRANSITIONEXPENSES

Tota

l IC

AN

N

Reserve Fund New gTLDFunds

Auction Proceeds

PTI/ IANA 1

PTI/ IANA 1

1 IANA Services includes ICANN’s and PTI’s IANA Expenses2 Excludes depreciation and bad debt expenses

| 32In millions, USD- unaudited – Scale and Arithmetic inconsistencies are due to rounding to the nearest million.

FY18 Year-to-date (Jul 17- Mar 18) OverviewICANN OPERATIONS

Funding and Expenses below target.

Note: Expenses exclude bad debt and depreciation and include capital expenses.

IANA Services ($5) ($7) $2 -29% ($6) $1 -18%

All Other ($88) ($97) $10 -10% ($83) ($5) 6%

Breakdown of Expenses % VarActual Budget Var % Var FY17 Var

Actual Budget Var % Var FY17 Var % Var

Funding $98 $107 -$9 -8% $105 ($7) -6%

Expenses ($93) ($105) $12 -11% ($89) ($4) 4%

IANA Stewardship Transition Expenses

($1) ($2) $1 -58% ($5) $4 -80%

Net $4 $0 $4 N/A $11 ($6) -58%

| 33In millions, USD- unaudited – Scale and Arithmetic inconsistencies are due to rounding to the nearest million.

FY18 Year-to-date (Jul 17 – Mar 18) FundingICANN OPERATIONS

Driven By Domain Name Registrations

Driven By # of Contracted Parties

$38M39%

Registration-based fees Per-TLD fixed fees

$24M24%

Registration-based fees

$11M11%

Application feesAccreditation fees

FRO

M

REGI

STRI

ESFR

OM

RE

GIST

RARS

$23M24%

Other Income: $2M, 2% Total Funding: $98M

| 34In millions, USD- unaudited – Scale and Arithmetic inconsistencies are due to rounding to the nearest million.

FY18 Year-to-date (Jul 17 – Mar 18) Funding vs Budget & FY17

Actual: $ 98MBudget: $ 107MFY17: $ 105M

ICANN OPERATIONS

Funding below target due to lower registration volumes

$38

$24 $23

$11

$2

$43

$28

$23

$11

$3

$41

$27

$23

$12

$2

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

REGISTRY TRANSACTION FEE

REGISTRAR TRANSACTION FEE

REGISTRY FIXED FEE

REGISTRAR OTHER FEES

OTHER

Actual Budget FY17

| 35In millions, USD- unaudited – Scale and Arithmetic inconsistencies are due to rounding to the nearest million.

FY18 Year-to-date (Jul 17 – Mar 18) Operating & Capital Expenses

Personnel$52M56%

Travel & Meetings$12M13%

Professional Services

$15M16%

Administration & Other*$13M13%

Capital$2M2%

Includes IT infrastructure and security improvements

Includes rent and other facilities costs and telecommunications

Includes contractor services, legal fees and language services

Includes travel and venue costs for outreach and meetings.

Reflects an average headcount of 387 which excludes 3.7 headcount allocated to the IANA Stewardship Transition Project

*Excludes bad debt and depreciation

ICANN OPERATIONS

Year-to-date Actual Expenses : $93M

| 36In millions, USD- unaudited – Scale and Arithmetic inconsistencies are due to rounding to the nearest million.

FY18 Year-to-date (Jul 17 – Mar 18) Operating & Capital Expenses

Actual: $ 93MBudget: $ 105MFY17: $ 89M

ICANN OPERATIONS

Lower professional services costs and timing differences of projects vs. plan.

$52

$12$15 $13

$2

$52

$13

$21

$15

$3

$43

$12$15 $13

$6

$0

$10

$20

$30

$40

$50

$60

PERSONNEL TRAVEL & MEETINGS PROFESSIONAL SERVICES

ADMINISTRATION & OTHER

CAPITAL

Actual Budget FY17

Activities covered by the contingency have been reported in the expense categories above based on the nature of the expense.The Contingency budget year to date is $1.9M.

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FY18 Year-to-date (Jul 17-Mar 18) New gTLD Program Expenses vs Budget & FY18

$2

$5

$1

$7$8

$2$1

$13

$1

$0

$2

$4

$6

$8

$10

$12

$14

REFUNDS OF WITHDRAWN APPLICATIONS

APPLICATION PROCESSING REPAYMENT OF HISTORICAL DEV. COSTS

Actual Budget FY17

New gTLD PROGRAM Actual: $ 7MBudget: $ 11M FY17: $ 15M

Lower refunds of withdrawn applications.Processing costs higher than target

due to legal fees.

| 38In millions, USD- unaudited – Scale and Arithmetic inconsistencies are due to rounding to the nearest million.

New gTLD Program – Multi-year Forecast

Application fees collected

FY12-17ACTUAL

Costs $ 198

Refunds $ 42

$ 240FY18

FORECAST

Costs $ 11Refunds $ 2

$ 13

FY19FORECAST

Costs $ 9

Refunds $ 18

$ 13

$ 362M

Costs $ 228

FULL PROGRAMFORECAST

$ 281M $ 89

b

$ 81M

Costs $ 53

Costs $ 10

FY20 & BEYONDFORECAST

$ 15

Refunds $ 4

Refunds $ 53

Refunds

Application processing costs Cumulative costs

Remaining funds for unexpected expenses (including risks)

Refunds $ 5

| 39In millions, USD- unaudited – Scale and Arithmetic inconsistencies are due to rounding to the nearest million.

FY18 Year-to-date (Jul 17-Mar 18) Total ICANN Organization Actuals

TOTAL ICANN ORG.

Total ICANN Operations is the sum of ICANN Operations (A) and IANA Stewardship Transition (B). Total ICANN Organization is the sum of ICANN Operations (A), IANA Stewardship Transition (B), and New gTLD Prgram (C).

*Expenses exclude bad debt, depreciation and refunds for withdrawn New gTLD applications which are included in the Funding line.

ICANN Operations

IANA Stewardship

Transition

Total ICANN Operations

New gTLD Program

Total ICANN Org.

(A) (B) (A+B) (C) (A+B+C)

Funding $98 $0 $98 $9 $107

Expenses* ($93) ($1) ($94) ($5) ($99)

Net $5 ($1) $4 $3 $8

| 40In millions, USD- unaudited – Scale and Arithmetic inconsistencies are due to rounding to the nearest million.

Funds Under Management as of 31 March 2018

Total Funds: $ 461MICANN Operations: $ 105MNew gTLD Program-related: $ 357M

FUNDS UNDER MGMT.

Reserve Fund$70

Reserve Fund$70

Operating Fund, $34

Operating Fund, $35

$104 $104

31 Dec 2017 31 Mar 2018

ICANN Operations

Auction Proceeds

$236

Auction Proceeds

$237

New gTLD

Funds, $121

New gTLD

Funds, $120

$358 $357

31 Dec 2017 21 Mar 2018

New gTLD Program

| 41In millions, USD- unaudited – Scale and Arithmetic inconsistencies are due to rounding to the nearest million.

FY18 Year-to-date (Jul 17- Mar 18) Overview - ForecastICANN OPERATIONS

Expenses below Forecast

Note: Expenses exclude bad debt and depreciation and include capital expenses.

Actual Forecast Var % Var FY17 Var % Var

Funding $98 $98 $0 0% $105 ($7) -6%

Expenses ($93) ($96) $3 -3% ($89) ($4) 4%

IANA Stewardship Transition Expenses

($1) ($2) $1 -42% ($5) $4 -80%

Net $4 $1 $3 N/A $11 ($6) -58%

| 42In millions, USD- unaudited – Scale and Arithmetic inconsistencies are due to rounding to the nearest million.

FY18 Total ICANN Organization - Forecast

TOTAL ICANN ORG.

Total ICANN Operations is the sum of ICANN Operations (A) and IANA Stewardship Transition (B). Total ICANN Organization is the sum of ICANN Operations (A), IANA Stewardship Transition (B), and New gTLD Prgram (C).

*Expenses exclude bad debt, depreciation and refunds for withdrawn New gTLD applications which are included in the Funding line.

ICANN Operations

IANA Stewardship

Transition

Total ICANN Operations

New gTLD Program

Total ICANN Org.

(A) (B) (A+B) (C) (A+B+C)

Funding $135 $0 $135 -$7 $128

Expenses* ($136) ($2) ($139) ($11) ($149)

Net ($2) ($2) ($4) ($17) ($21)

Funding from FY17 Savings (Approved by

Board)$2 $0 $2 $0 $2

Net $0 ($2) ($2) ($17) ($19)